--Thomson Reuters set to buy FXall as trading platforms fight it
out for volume
--Move surprises industry insiders
--Merger likely to boost pressure on competition, but
difficulties may lie for integration
Thomson Reuters Corp. (TRI) Monday said it has agreed to buy
electronic currencies trading platform FX Alliance Inc. (FX) for
$616 million, cranking up competition in the electronic currencies
dealing space and suggesting the data-provider is striving to get a
bigger slice of the $4 trillion global currencies business.
Thomson Reuters, which also produces news that competes with
News Corp.'s Dow Jones & Co., publisher of The Wall Street
Journal and Dow Jones Newswires, has traditionally focused on
bank-to-bank currency-trading systems while FXall's systems served
companies and investors. Those two areas have never been combined
in this way before.
The two platforms are now set to merge in a move that looks to
be in direct contrast to the wider industry trend of serving
specific customer groups on different trading venues. But melding
the systems together, and potentially pooling all users--banks and
clients--onto a common platform, will be tough.
A spokesperson for FXall said the two platforms will now merge,
but declined to give further details until the deal completes in
the coming months. The combined might of the two companies -- an
average $154 billion of trades a day flowed through Thomson Reuters
in May and an average $98.6 billion went through FXall in June --
would make the new venue easily the biggest electronic trading pool
in foreign exchange.
"Thomson Reuters...will support FXall and its own FX platforms,"
said a Thomson Reuters spokesperson. "The details of the combined
organization will be reviewed as part of the integration planning
activities and any announcements will be made after the close of
the transaction."
The merger of the two systems took industry insiders by
surprise. "I'm totally blindsided. I would not have put to the two
together," said David Poole, a principal at consultancy
ClientKnowledge in London.
The head of operations at a separate currency-trading platform,
who did not wish to be named, described the tie-up as "big news"
that will compete keenly with ICAP PLC (IAP.LN)-owned EBS, which
has up to now held a duopoly in bank-to-bank trading with Reuters.
EBS declined to comment.
Knitting together bank- and customer-focused systems is likely
to prove tricky, as EBS found out when it allowed non-bank clients
to trade on the system more than five years ago, leading to
dissatisfaction amongst its traditional bank market-makers.
After lagging Thomson Reuters' volumes for more than six months,
EBS is now set to announce changes to its rules that would level
out the playing field for bank client by reducing the trading
advantages to traders who benefit from superior technology and
faster trading speed.
"What remains to be seen is whether this [merger] will trigger a
wave of further acquisitions and concentration, or whether it will
spook the broker-dealers who could view the potential opening of
the protected inter-dealer platforms with suspicion," said Frederic
Ponzo, managing partner at Greyspark, a capital markets
consultancy.
Write to Eva Szalay at eva.szalay@dowjones.com